Thursday, 8 September 2011

With HAL overloaded, IAF turns to private sector

IAF procurement head to Business Standard: "$50 billion could be spent on new aircraft between 2007-2011."

By Ajai Shukla

Business Standard, 8th Sept 11

The new IAF chief, Air Chief Marshal NAK Browne, has reached out to India’s fledgling private aerospace industry. Worried by the growing inability of public sector Hindustan Aeronautics Limited (HAL) to keep the IAF fleet flying, Browne has promised to back a private sector production line that will manufacture a replacement for the vintage HS-748 Avro transport aircraft. The private sector is needed, says the IAF chief, to back the air force’s major expansion.

Browne told a gathering of aerospace CEOs in New Delhi on Thursday that the IAF had signed 271 capital acquisition contracts between 2006-11, paying out Rs 1,12,000 crore ($25 billion). Questioned by Business Standard on the sidelines, the IAF’s top acquisitions manager forecast that an additional Rs 2,24,000 crore ($50 billion) could be spent on new aircraft from 2012-2017. This figure is significantly higher than various estimations made in the past.

According to the IAF chief, the new platforms being inducted during the 11th and 12th Defence Plans (from 2007-2017) included the Su-30MKI; the new Light Combat Aircraft (LCA); the medium multi-role combat aircraft (“If we can sign that contract it will be a big relief for us”); the Indo-Russian Fifth Generation Fighter Aircraft; the very heavy transport aircraft (Boeing’s C-17 Globemaster III); the medium transport aircraft; and a range of helicopters that are being developed by Hindustan Aeronautics Ltd. Browne also included new surface-to-air missile systems; air defence systems; and the modernisation of 29 airfields that will conclude by 2014.

But keeping this multi-billion dollar fleet flying, said the IAF chief, meant a big role for the private sector. Browne appealed for support “in terms of spares, in terms of life-cycle support, and the other systems for which we cannot keep relying on the OEMs (original equipment manufacturers) or the foreign partners… We must have a robust aerospace industry that grows with the IAF to support us. That is what we look forward to from our (industry) partners.”

Appealing to private industry for support through the entire 40-year service lives of these high-tech aircraft (“the cradle-to-grave concept”, he called it), Browne urged, “We need to imbibe the culture of supporting the equipment through its lifetime. This also includes the mid-life upgrades and also in case of licensed production, the OEM (who may be a foreign partner) and the local aerospace industry here would have to transfer R&D and move to building spare parts from there.

Pledging his support to the private sector, Browne promised to back the Indian aerospace industry in building a replacement for the HS-748 Avro transport aircraft, which has already been in service for half a century. “We have proposed to the MoD that we could buy a certain amount (of Avro replacement aircraft) from the OEM outside, and then have local industry here manufacture the rest in terms of licensed production.”

Such an order would have, in the past, automatically gone to Hindustan Aeronautics Limited (HAL). But the IAF, deeply worried about HAL’s growing delays in delivering aircraft that it is already building (e.g. the Su-30MKI), has apparently decided to back a private sector alternative to HAL.

Browne said, “We have suggested this model (of private sector participation) to the government. Otherwise it will go to a defence PSU, who as you are quite aware, their capacities are also limited, and they have too much on their hands at this point in time. So this kind of process would certainly help the aerospace industry in the long term.”

The IAF is concerned, however, at the low R&D spend within the private sector; and also at the lack of track record. It believes, therefore, that the best way to bring the private sector into aerospace manufacture is through promoting licensed manufacture in partnership with a foreign OEM. According to Browne the Avro replacement offers an ideal opportunity because the aircraft would be suitable not just for the IAF, but for civilian users as well.

“This is a suggestion given by the IAF and I’m happy to tell you that the ministry has a very positive take on this point. In due course of time, when the issue comes up before the Defence Acquisition Council, you have my assurance that this will have my support, and we’ll try and push that through,” promised Browne.

The reason for low R&D spend in private sector is the Quixotic viewpoints harboured by MoD Procurement every now and then. Sort out MoD Procurement and private sector will leap at the opportunities presented. If we could do it for nuclear sector, there is no reason we cannot do it for aerospace as well.

Ajaji, how beautifully this ties with your earlier post. Offset could have been more strident and our private defense industry could have been kick started. Please somebody give 10% sweet equity to MOD netas and babus. Please, somebody give it...now for sake of our dream to have one day India's LM and Boeing.

A very suitable replacement for the venerable Avro would be the ATR 42/72 family - already well known in Indian skies. This platform could easily serve the needs of the IAF, Navy, CG as well as civilian airlines. In a sense, its ano brainer but then again, the MoD babus are not exactly known for doing the logical thing... Sorry to be pessimistic, but this will end up being another long drawn out affair with many opportunities for many people to line their pockets.

It is very surprising why HAL does not expand its manufacturing capacities at Kanpur, Nashik or at other locations. There was appreciation for HAL Kanpur on the occasion of handing over the 100th Dornier aircraft. But for more than a decade no capacity expansion has been undertaken at HAL Kanpur. Also, HAL Kanpur has not been alloted any new aircraft for manufacturing during last one decade. Same is the case with HAL Nashik. Their vast experience in manufacturing of aircraft of foreign design goes un-utilised. Both HAL units of Kanpur and Nashik must be alloted some more indigenous aircraft manufacturing responsibilities. All HAL units need capacity expansion.It is suggested that ten percent shares of HAL must be sold in the market. P.K.Chaudhuri.

A smell of optimism or something else? What exactly ACM means when he says "Avro replacement" and "we can buy certain numbers from outside" and "it will be useful for civilian users"? I don't think ACM is unaware of project RTA and its specs? Question arises, why is he almost insisting on buying a foreign design? Why this urgency now when RTA program is about to kick start? Besides, if IAF is so keen on involving private sector in Aerospace manufacturing then why it did not granted like of L&T , TATA the manufacturing rights for NAL SARAS?

Call me cynical or anything but to me ACM Browne is same old wine in new bottle. He like his predecessors (may be except ACM Major) is obsessed with foreign-made and go mad thinking of Desi.